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Cash Payments: Not Just for the Underbanked

Strategically Speaking
Jan 14, 2015

Penny_Webb_Headshot_50x50 Author: Penny Webb,

If you follow payments news, you have likely seen article after article referencing the un- and under-banked describing how they function in today’s society using mostly cash, prepaid cards and smartphones. Since the mid to late 1990’s, cash payments have been thought of as the bill payment method of last resort since it can’t utilize standard forms of delivery such as mail, lockbox and internet bill payment. Cash has come to be seen as a method of payment for those whose limited banking relationships translate into limited payment choices.

While un- and under-banked individuals do account for a large portion of cash payments, others may also be drawn to the easy to use and convenient cash payment alternative. I live in Nashville, Tennessee, which has always had a thriving music industry. Celebrity chefs are also starting to swarm this town and new high-end restaurants are popping up almost weekly. These influences have infused the area with a large population of musicians and restaurant staff, both of which are more likely to deal in cash than people in 9-to-5 professions. I know Nashville is not unique in this scenario.

In addition, some financial planning programs promote the use of cash as a way to maintain privacy and monitor spending. This leaves a lot of people with ready cash and those people have bills to pay.  In fact, the total amount of U.S. currency in circulation has been increasing year over year, and a recent study by the San Francisco Fed indicated that this trend will continue. In an era where many merchants are working to eliminate cash payments due to processing costs and security risks, this would seem to leave a hole in the payments market.

As a payments provider, it is important to consider how we could meet the needs of these cash rich individuals and the merchants that need their payments. Individuals with bank accounts that end up with a stack of cash and bills to pay will need to travel to a brick and mortar bank or ATM to deposit the cash, then turn around and make a mobile payment via smart phone. The un- and  under- banked individuals  have to trek to a convenience store, bank or credit union branch to convert the cash into a money order so they can send it via US mail, or make the trip to the company or store to make the payment in person. All of these options introduce additional time and cost to the payer, and do nothing to expedite the payment process.  Wouldn’t it be much more efficient if cash-preferring payers could pay a variety of bills with cash at places they already shop? What if they could simply show the cashier a pre-printed 3D bar code or display it on their smartphone to pay their bill in the same way they pay for any other product in their shopping cart? This may sound a little far-fetched, but there are innovative products in the market today that actually make this happen. These products facilitate the payment and manage settlement between the merchant that takes in the cash and the merchant to which the payment is owed.

While cash payments aren’t going to become the norm for the majority of payers, solutions that automate and simplify paying with cash could be one way for a financial services provider to help business clients collect payments from customers. Such services could make cash a viable option for not only the un- and under-banked but also the growing number of people who consistently have ready cash or choose to rely on cash as a safe, private form of payment.


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